Unemployment in Mexico Edges Up to 3%, With 55% of Workers Off the Books

Mexico's unemployment rate climbed to 3.0% in August, according to the national statistics institute INEGI, a slight increase from 2.9% in July. This figure, while appearing low by international standards, reveals a labor market where many struggle to secure stable employment. Over half of Mexico's workforce operates informally, lacking social security protection.

INEGI's National Survey of Occupation and Employment measures unemployment by tracking individuals who did not work during the survey week and actively sought jobs. In August, 1.88 million people were unemployed, a 87,000 increase from a year prior, while the labor force expanded by 1.3 million to 62.6 million. Employment also rose by 1.2 million over the year, reaching 60.7 million.

The share of those aged 15 and above in the labor force or seeking work stood at 59.3%, up from 58.8%. While seasonally adjusted data kept unemployment steady at 2.7%, the rise from July appears to reflect the typical August pattern. However, a troubling detail is the sharp rise in long-term unemployment, with 158,755 individuals jobless for six months to a year, nearly doubling from the previous year.

Mexico lacks a national unemployment insurance system, leaving workers to rely on whatever work they can find, often in unregistered businesses. Consequently, 55.0% of workers, or 33.4 million people, were in informal employment in August, an increase from the previous year. Informal work accounted for most new jobs this year, as Mexico's informality drove 82% of job growth in the second quarter.

Another 7.0% of workers, or 4.3 million individuals, were underemployed, seeking more hours than they currently had. Despite this, another 5.0 million people were outside the labor force but willing to work but not looking. The broadest gauge, critical working conditions, showed 37.8% of workers facing too few hours or very low pay, up from 37.3% a year earlier.

The breakdown reveals where pressure lies: manufacturing shed 263,000 workers, farming lost 290,000, and retail and wholesale trade saw a 161,000 decrease. Conversely, services like restaurants and hotels added 538,000 jobs, other services gained 790,000, and government added 242,000. Manufacturing, heavily reliant on US demand, saw no improvement in formalization, with informality rates rising by 0.2%.

Informal employment in unregistered household businesses rose 0.7 points to 30.3%. Formal jobs, measured by IMSS, the Mexican Social Security Institute, grew by 38,319 in August, after a 19,550 drop in July. Total formal employment increased by 1.5% over the year to 22.8 million. However, a Federal Reserve Bank of Dallas analysis indicates a month-over-month decline of 9,100 jobs.

Over a year, formal jobs rose by 343,556, or 1.5%, to 22.8 million. Adjusted for seasonality, the Federal Reserve Bank of Dallas reports a 9,100 job decline in August, with IMSS-registered jobs growing by 343,556 over the past year. The US-Mexico-Canada Agreement, a regional trade pact, is uncertain, with Washington declining to renew it and instead opting for annual reviews.

US tariffs now apply to cars, auto parts, machinery, and steel. Meanwhile, private investment in Mexico fell by 13% in the first half of 2026, and fixed investment dropped for 19 consecutive months. The central bank, Banxico, kept interest rates at 6.50% during three consecutive meetings without a change. Banxico's September meeting occurred on 8 October, and the central bank will decide on rates again on 5 November.

The August unemployment figure does not indicate a recession or mass layoffs, as the seasonally adjusted rate remained stable, and total employment grew by 1.2 million compared to a year ago.